Phosphotyrosine Phosphatase 1B (PTP1B) regulates glucose uptake and has been validated as a drug target for the treatment of type II diabetes as well as obesity. Despite widespread interest, the development of small molecule PTP1B inhibitors has been hindered by two main issues; the lack of bioavailability due to the polar nature of most known inhibitors and poor selectivity of the inhibitor over other phosphatases due to the highly conserved active sites across the PTP family. Because of this a need exists for new methodologies to inhibit the functions of PTP1B and other phosphatases. In this proposal we outline two different strategies to accomplish this goal. First, we propose to develop a novel small molecule screening strategy for the direct discovery of allosteric ligands of phosphatases. An allosteric small molecule is likely to overcome the stated limitations of phosphatase active site inhibitors since it would likely bind to a region of the phosphatase that is not as highly conserved or polar as the active site. We will capitalize on the well precedented propensity of vanadate ions to bind the active site of phosphatases and form stable analogs of key transition states in phosphate transfer. We propose to test this concept by implementing Small Molecule Microarray (SMM) technology to screen for small molecule allosteric ligands of a vanadate stabilized transition state conformation of PTP1B. A second strategy for inhibiting phosphatase function is to target the phosphatase for degradation by redirecting the ubiquitin-proteasome pathway towards a target phosphatase. We envision achieving this for PTP1B by implementing a chimeric small molecule containing a known PTP1B ligand tethered to a low molecular weight drug-like molecule that can bind the von Hippel-Lindau tumor suppressor (VHL), the recognition subunit of the VBC-Cul2 E3 ubiquitin ligase complex. Such a PROteolysis TArgeting Chimera (PROTAC) should induce the poly-ubiquitination of PTP1B, leading to its degradation by the proteosome. Both of these methodologies strive to control the function of phosphatases through the use of small molecules. While we will initially develop these methodologies on the well studied phosphatase PTP1B, a validated drug target for type II diabetes, we subsequently plan to expand these studies to other phosphatases which have been implicated in cancer and other diseases.